Summary

We forecast average real GDP growth and real GDP growth per head slightly below 2% throughout 2018-50. An unfavourable demographic profile, a difficult business environment, a fragile banking system, weak institutions and overreliance on natural resources will place strong constraints on Russia's long-term growth. Given its strong industrial tradition, Russia's chances of diversifying its economy could be good, but this potential is unlikely to be fully realised in the medium term, following a sharp deterioration in political and economic relations with the West and structurally low investment levels. Growth rates could fall if commodity price drop sharply (for instance as a result of geopolitical tensions) or if a major conflict erupts between Russia and the West.